Welcome to the 4th Quarter 2020 Earnings Call. My name is Sabrina, and I'll be the operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.
I will now turn the call over to Lisa Coady. Lisa, you may begin.
Thank you, Sylvia, and good morning. Welcome to Ameriprise Financial's 4th Quarter Earnings Call. On the call with me today are Jim Craciello, Ceramian's CEO And Walter Berman, Chief Financial Officer. Following their remarks, we'd be happy to take your questions. Turning to our earnings presentation materials that are available on our website.
On Slide 2, you will see a discussion of forward looking statements. Specifically, during the call, you will hear references to various non GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www atir.menterprise.com. Some statements that we make on this call may be forward looking. This will be management's expectations about future events and overall operating plans and performance.
These forward looking statements speak only as of today's date and involve a number of risks and uncertainties. A sample list of factors and risks Those could cause actual results to be materially different from forward looking statements can be found in our Q4 2020 earnings release, Our 2019 annual report to shareholders and our 2019 10 ks report. We have no obligation to publicly update or revise these forward looking statements. On Slide 3, you see our GAAP financial results at the top of the page for the Q4. Below that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitate a more meaningful trend analysis.
Many of the comments that management makes on the call today will focus on adjusted operating results. And with that, I'll turn it over to Jim.
Good morning, and thanks for joining our Q4 earnings call. As you saw in our release, Ameriprise delivered an excellent quarter and a very strong year, Considering the challenging operating environment, in the quarter, equity markets rallied on positive vaccine moves, the outcome of the U. S. Election and the likelihood of further The strength of our advice value proposition, investment expertise and solutions are translating to our business results. Client activity and flows in the quarter continue to be very strong, and we set new records, including ending the quarter with assets under management over $3,000,000,000 driven by strong business fundamentals and positive equity markets offsetting the interest rate headwinds.
Earnings per share also increased nicely in the quarter, up 2% and ROE remained very strong at 36%. During the quarter, we continue to make good investments in the business as well as continuing to execute against our reengineering goals, resulting in a 1% decline in G and A expenses. We're always looking to drive efficiency and invest strategically to extend our position. It's core to how we operate. We also returned more than $500,000,000 to shareholders, which was 90% of our adjusted operating earnings and among the best in financial services.
For the full year, we returned close to $2,000,000,000 Very Clearly, our ability to consistently generate substantial free cash flow as well as to reinvest and return to shareholders Our key differentiators for us. Let's turn to Advice and Wealth Management, where we delivered a very strong quarter and good organic growth. Beginning with our clients, we're delivering a differentiated level of advice, keeping clients focused on their goals, which was in a volatile disruptive year. Total client assets were up 14% to $732,000,000,000 driven by excellent client flows and positive markets. As you know, we've built a leading investment advisory business and it continues to grow nicely.
For us and a great indication of our excellent client advisor engagement and focus on growth. Another highlight With transactional activity bouncing back and up 5% over last year, and client cash balances continue to grow and ended the quarter at 41 $500,000,000 up $2,100,000,000 from last quarter. Meanwhile, we're continuing our best To make our offering even more compelling for clients and advisors, we continue to see very good engagement in our digital capabilities, Allowing advisers and clients to interact and transact seamlessly and the majority of clients now have their goals online and follow their progress. Our advisers are utilizing our tools and capabilities on our integrated technology platform. They are reporting that they're conducting business more efficiently and spending more time with their clients and growing their practices.
That's evident in increased financial planning and advisor productivity, Which was up 8% adjusting for interest rates. You've heard me say that one of the greatest benefits of being an Ameriprise advisor It's our caring culture, including truly best in class support and strong field leadership. I recently spoke with all of our field leaders to kick off the year. We're energized about Ameriprise and are focused on continuing to drive productivity and growth. This high level of Report is also reflected in our recruiting success.
Our virtual recruiting program is extremely effective and continues to drive strong results With 82 experienced advisors joining us in the Q4, we're recruiting top advisors from across the industry We recognize that Ameriprise offers the value proposition, technology and level of support that can help them deliver an Exceptional advisor based client experience and take their practices to the next level of success. And we have a track record of helping advisors grow 2.5 times faster than peers, which is very compelling from a competitive perspective. So far in 2021, This momentum continues and the recruiting pipeline remains strong. It was also great to see that our Client service teams are once again recognized by J. D.
Power for the excellent experience they deliver. This certification recognizes best practices from the highest performing contact centers across all industries, not just financial services. Regarding the bank, total assets grew to $8,000,000,000 with $7,000,000,000 of sweep deposits. We plan to move additional We also added pledge loans to the product portfolio in the quarter, and we're seeing a good response to date. It's an appealing product for higher network clients seeking liquidity.
Wrapping up AWM, margin was Strong at 19.8% and we're up 60 basis points sequentially. As I mentioned earlier, Expenses continue to be well managed with G and A up only 2% and that includes investments in the bank. Next, Retirement and Protection Solutions. This business is performing well and in line with our expectations. We're executing our plan to drive a mix shift in the business focusing on highly penny products within the rate environment, which is further reducing our risk.
Variable annuity sales increased nicely, up 20%, driven by the success of the structured product we introduced earlier in the year, More than offsetting reduced sales of living benefit products. Very importantly, this increased the percentage of VA sales without living benefits, Which grew to 58% of total sales in the quarter. In protection, while sales were down 4% year over year, we've seen improvement quarter to quarter. Sales of our flagship VUL products doubled in the quarter, offsetting the reduced sales from IUL products. This Product both better meet clients' needs in this rate environment while generating good returns for the firm.
Clearly, As Ameriprise continues to grow overall, the Retirement and Protection Solutions segment will represent a small part of our business mix over time. With regard to fixed annuities, I know some of you are interested in our progress regarding a reinsurance transaction. We are actively looking to execute a transaction this year and are encouraged by the recent uptick in the 10 year rate. Turning to asset management. We continue to build on our progress and have a great story to share as an asset manager.
The team is serving clients well and driving profitable growth. We continue to have excellent client engagement and investment performance. The investments we're making, Including in data and digital are helping to drive organic growth at Columbia Threadneedle with strong results in North America. We're targeting advisors better in delivering a compelling experience. And importantly, we strengthened our relationship with our distribution partners across regions, including with the large broker dealer firms and independents in the U.
S. We're also investing in our operating platform, including important work to reduce duplicate legacy systems. In the quarter, we completed the final phase of the installation of our global trading portfolio management system, which will help our investment teams and drive additional efficiency and scale globally. With a continuation of positive flows and positive markets, assets management grew 11% to $547,000,000,000 Our asset management business is making Strong contributions to our overall earnings and free cash flow and margin for the quarter was nearly 40%. Looking ahead, we expect to remain in the 35% to 39% range.
However, if these market levels hold, we should come in at the higher end. Strong investment performance has been essential to our success and our teams have been collaborating really well through this pandemic. We have steadily invested to build a strong global platform with a disciplined research focus, and our people are delivering Exceptional performance across all categories, equities, fixed income and multi asset strategies. At year end, Columbia Threadneedle had a 104 and 5 star funds, which shows the breadth and scent of our product lineup. In equities on a global basis, over 70% of our funds on an asset weighted basis were above medium or beating benchmarks over 1, 3 5 year period, And that's across domestic and international strategies.
With regard to fixed income, we also had great performance. More than 75% of our taxable funds on an asset weighted basis were above medium or medium benchmarks over the same timeframe. So with this type of investment performance and the growth focus across the business, flows continue to be strong. Overall, excluding former parent outflows, We were net positive $8,300,000,000 for the quarter, an improvement of $4,100,000,000 from a year ago. In terms of total retail flows, excluding former parent, we were net positive by $7,700,000,000 including the invested dividend.
These positive flows were driven by continued momentum in the U. S, where we were in net inflows for 10 months of the year and that included dislocation in March. For the quarter, U. S. Retail had $7,100,000,000 of net inflows.
In fact, 30 Columbia Strategies were in net inflows And Ten had gross sales in excess of $1,000,000,000 in 2020, and that's across equities, fixed income and our multi manager lineup. In EMEA Retail, we were in net inflows of more than $600,000,000 in the quarter with particular strength in Continental Europe, Which more than offset outflows in the U. K. We're optimistic that the resolution of Brexit and the gradual reopening of the U. K.
Economy We'll be positive in terms of investor sentiment. And in terms of global institutional, we continue to gain traction, Have a significant opportunity and platform to grow. We have a compelling lineup of capabilities and excellent investment performance. We recently added to our consultant relations team and strengthened client service. In the quarter, we had net inflows ex former parent of about $500,000,000 driven by continued strength in EMEA.
The pipeline looks attractive across our regions. So when I look across Asset Management, I'm very pleased with the momentum over the last number of quarters and our ability to sustain it. Stepping back to Ameriprise overall, we're in a terrific position. We're delivering strong results and further reinforcing our record of navigating uncertain times. I'm incredibly proud of our employees and advisors and the resilience that has shown during this pandemic.
They've stayed focused on our Clients will continually drive the strong results you're seeing. Nearly a month into 2021, I feel very good about the high level of client engagement And business activity that we're generating. From a capital perspective, we're continuing to deliver a differentiated level of return. Our balance sheet fundamentals are excellent and we're generating strong free cash flow. With that, Walter will cover the quarter in more detail and then I'll take your questions.
Thank you, Jim. Ameriprise delivered a strong quarter of financial results and excellent business metrics With adjusted operating EPS up 8%, a strong underlying organic growth more than offset headwinds From low interest rates, assets under management and administration reached a record $1,100,000,000,000 including nearly $15,000,000,000 of inflows from RAP and Asset Management. We achieved our targeted reengineering for the year While investing for future growth in Advice and Wealth Management and Asset Management, we continue to effectively manage our profile With continued mix shift to lower risk, higher margin retirement and protection solution offerings And are actively exploring additional reinsurance opportunities. In 2020, we returned over $1,800,000,000 of Capital to shareholders. Our strong balance sheet fundamentals coupled with sustained underlying business growth are driving free cash flow generation Across our business segments, this positions us well as we enter 2021.
Let's turn to Slide 6. Ameriprise adjusted operating net revenue grew 6%, Driven by strong underlying business trends and equity market appreciation. After Excluding the benefit of $92,000,000 of higher short term interest rates in the prior period, general and administrative expenses are down 1% Even as we make investments for growth, including the bank. Expenses also include higher compensation associated with the impact of Strong share price appreciation in the quarter and strong business performance. We are able to achieve this result through disciplined reengineering initiatives.
In total, we delivered strong underlying EPS growth, Excluding interest rates of over 20% and very strong margins in the quarter. Turning to Slide 7. As Jim mentioned, Advice and Wealth Management delivered robust organic growth. We continue to benefit from sustained traction and experienced advisor recruiting, Our personalized client experience, effectiveness of our digital tools and success in reaching more of our target market. As you can see in these core areas, we had strong growth in client assets, wrap flows And advisor productivity.
This is a good foundation as we move forward. On Page 8, financial results in Advice Wealth Management was strong With underlying adjusted operating earnings up 19 percent to $352,000,000 after the $92,000,000 interest rate headwind, This was driven by strong rat net inflows, improved transactional activity and higher market levels As well as continued expense management. Pretax adjusted operating margin was 19.8%, which would have been 160 basis points improvement year over year excluding change in interest rates. On a sequential basis, The margin improved 60 basis points. Turning to Page 9.
Asset Management delivered very good financial performance And continued improved flow trends. The cumulative impact of outflows has been a significant headwind for us in the past. As flows improve this year, that has declined and as inflows continue, this would provide Tailwind for us in 2021. In the quarter, we had inflows of 8,300,000,000 Excluding former parent related flows, which is a $4,100,000,000 improvement from a year ago, Investment performance, table stakes for net inflows is excellent across a diverse product set. Adjusted operating revenues were $798,000,000 Revenue increased 7%, reflecting improved flow trends, Stable fee rate and market appreciation after normalizing for the timing of the performance fees.
General and administrative expenses remain well mannered, reflecting disciplined expense reengineering that funded investments for growth. Adjusted for the timing of performance fees and other compensation related expense, G and A increased 2%. Putting this together, free cash adjusted operating earnings grew 13% with a 39.5% margin. Overall, We are very encouraged by the continued progress the business is making that is resulting in both strong flows and commercial performance. Let's turn to Page 10.
Retirement and Protection Solutions continues to perform in line with expectations in this market and rate environment. We are executing our strategy to shift our risk profile. In the quarter, 58% of sales were on products Without living benefits, up 24% a year ago, driven by our new structured variable annuity product Along with the decline in sales of BA products with ramping benefits. In protection, sales were down 4% in total With a meaningful increase in higher margin DUL and a significant decline in index universal life, A product that is not as attractive in this rate environment, these mix shifts are expected to continue going forward. Financial results continue to be in line with expectations.
Pretax adjusted operating earnings increased 1% $280,000,000 Like the industry, we are seeing an uptick in claim counts related COVID-nineteen, but we've experienced a limited financial impact. Overall claims were more favorable than the prior year. This business is well managed. That amount at risk remains among the lowest in the industry and our hedging has been extremely effective. Turning to Page 11.
In total, the Corporate and Other segment had a $60,000,000 loss in the quarter, which was a $39,000,000 improvement from the prior year. Excluding the Closed Block, The loss in Corporate segment improved 23% to $79,000,000 The prior year period At elevated losses related to impairments in the affordable housing portfolio, the current year had approximately 24,000,000 Incremental compensation expense related to the impact of share price appreciation and company performance. In our closed blocks, Long Term Care had $21,000,000 of earnings in the quarter due to a significant increase in terminations and lower new claims. Fixed annuity had a $2,000,000 loss related to the low interest rate environment. We continue to evaluate opportunities to execute additional reinsurance transactions this Now let's move to the balance sheet on the last slide.
Our balance sheet fundamentals remain extremely strong, Including our liquidity position of $2,300,000,000 at the parent company, substantial excess capital of $1,900,000,000 98% hedge effectiveness in the quarter and 97% for the full year as well as A defensively positioned investment portfolio. Adjusted operating return on equity in the quarter remains strong at 36%. We returned $502,000,000 to shareholders in the quarter through dividends and buybacks, totaling over $1,800,000,000 for the full year. Overall, this was an excellent result for the quarter. With that, we'll take your questions.
Thank you. We will now begin the question and answer session. And the first question comes from Andrew Kligerman from Credit Suisse.
Good morning. I'd like to start with the Advice and Wealth Wrap net flows. I mean, dollars 7,900,000,000 was phenomenal. Just a year and a half ago, we thought Run rate was just a little over $4,000,000,000 Could you give a little color on the background of what drove it so high this quarter? And what kind of what might be a sustainable range?
Yes, Andrew, this is Jim. We continue to see a good pickup of activity over the course of the year. We were still having very Strong lap flows even in the prior quarter as you saw in our results over the year. But we saw a bit of an increase in the 4th Quarter, we actually grew our client base. We new client acquisitions picked up even more.
And we saw a good level of activity with our advisors. Now some of that could be people feeling a little better as the Teams came about as well, and the idea that the economy and activities would continue to open up. But I would probably say we've seen a more consistent strong flow coming in. So we feel good about Underlying growth factors and it was both from the legacy clients that we have organically as well as some new clients that we added.
Great. And then with regard to general and admin across the board, I Just a real solid outcome down 1% year over year. I think earlier last year, you were guiding to about $125,000,000 expense general and MIM declined year over year, and it was down about 76 And as we look at the quarter, and I think some of that was just fair play, some of that was maybe other investments that you were making in the company. Just kind of looking forward, could you kind of see another $50,000,000 pickup Getting back into that 125 objective, could you go further? Where are you looking towards G and A into 2021?
Okay.
So, we definitely more than exceed the reengineering goal that we mentioned to you of 125. So, that's embedded in our numbers. I think what you're seeing overall and we're talking about that not just for like the Q4, but over the course of The remaining part of the year after the pandemic, and so we had increased our reengineering goals in that regard and we did achieve them. Our expenses are being managed very well, but I would also say, we did also increase some investments we were making. We wanted to accelerate because of the great productivity we're having to even add a bit more in some of the technology and the capabilities that we wanted to bring to both the advisors and from a client perspective in our web activities.
So Our investment agenda last year was actually a bit higher in total dollars than within the year before. So that was embedded in our numbers. What I would say is the pickup you saw in a little bit of expenses were more from the stock price appreciation and what that Those in some of our deferral programs on a off to market and that absorbed and some 2 ups and some compensation based on the year and the strong Q4. So, I feel good about the expenses going into the New Year. I think they will increase if the But I think we're going to manage expenses pretty well.
And you know how we do that over time, but we'll continue to Look at the business growth, the revenue growth and the market climate as we do that.
Got it. And maybe just lastly, On the fixed annuity block, I think the block was $2,000,000 $2,000,000 in the quarter. Target was to free up about $700,000,000 in capital, but with kind of a money losing line like that, do you think Get close to the $700,000,000 and how imminent is that fixed annuity block sale?
Okay. I'll let Walter respond on the fixed annuity side. So, as Tim said and I said, in my thoughts, we are certainly Actually looking and we do believe that certainly we have to beat up the capital that's there and then we have to take The
basic
simplification of the rate, but we certainly feel that we will free We've implemented capital and we're working to evaluate. All right.
Thank you, Tim and Walter.
Welcome.
Our next question comes from Humphrey Lee from Dowling and Partners.
Good morning and thank you for taking my questions. Just stay with AWM for a moment. The transactional activities for mutual funds and long duration products appear to be back to pre Pandemic levels. Can you talk about how they trended throughout the quarter and what you are seeing into January?
Yes. So, we definitely saw a pickup as we went from the second to the third to the fourth Quarter and transaction activities and they got back more than that to a normal level. In fact, they're up 5% over the year before Q4. So we felt good. The pickup was, as we mentioned, both in the brokerage activity, but as well As in some long duration, I mean, even in our own business, where we sell our annuities, there is a Strong pickup and continued in our structured annuity business and even a pickup in the insurance business.
So We feel like we've gotten back to a more normalized level and we're thinking that that will continue as we go through the New Year. Got it.
And then in terms of capital deployment, as you plan for 2021, can you remind us How are you thinking about capital deployment priorities in terms of returning to shareholders versus M and A for whether it's AWM or F and I?
Yes. So, we have a consistent capital deployment strategy as you've seen over the years. We, first of all, make the right investments in the business that we think are good and appropriate for us that we'll get strong growth and productivity from. From there, we then evaluate the opportunities that may from both continuing to us to Increased our dividend, buyback appropriately based on the free cash flow that we generate, which is very strong. But we also evaluate acquisition opportunities.
And in that regard, we do see That there is more opportunities coming about, but we're very disciplined of what would strategically help us grow, what we can get good returns, what would fit into both our Culture and the environment to keep us on track. And so, we will continue to evaluate that. We have excess Capital that would help along those lines as well as what we would do as we look out based on the cash that we generate. So That's the way we look at it. We haven't changed that philosophy and we'll continue to focus in that way as we move forward.
I'm going to Mr. Walter. I'd just add that we're still targeting about 90% for this year. I think the question was on by that.
Okay. I guess on the M and A side, just to cut you a little bit. Is there any kind of preference between scale versus capabilities?
We look more for additional capabilities and that will continue to Their ability for us to grow, I mean, in certain acquisitions, it does provide some additional scale. We do and we've invested heavily in To our platform capabilities and technology that we could add more assets with very minimal cost. So, we feel that we have that ability as well, but primarily we look strategically about How we continue to round out and have a strong quality asset manager globally. That's helpful. Thank you.
Our next question comes from Jeremy Campbell from Barclays.
Hey, thanks. Just want to sit
there without the management for
a minute here. And you gave some good color. But I probably need to spend some time going a little more detail around the fund flows. And Kind of
wondering which high performing strategies maybe showing accelerating inflow momentum and Maybe if there are strategies that are either stating headwinds or an inflection from outflows to inflows, any color there would be fantastic. Yes. So, I think if you look at our supplemental, you'll see, first of all, we've had very strong investment performance across our On family, I mean particularly if you look at take equities as an example, our Using the benchmark on the 1, 3 and 5 year, 3 and 5 year are especially strong. Our fixed income strategies are Strong Threadneedle is having very strong performance across their range. So we feel like we have a broader Good lineup of funds.
As I mentioned to you in my talking points, there were over 30 funds that Growth more than $1,000,000,000 We had good net inflows in a number in the range of funds, so it's broadened from where we were. So we are continuing to see good flow in equity, particularly in The income oriented equities across our lineup, we're seeing a pickup in activity in global and European activity And some of our funds there, in fixed income, we see it in certain of our income ranges, like mortgages, etcetera. And you also in equities and manage the we have risk allocation funds that are doing well. And also growth and we're probably going to see a bit more of it, it's just a little bit more in The value maybe, which we have a lineup there as well. So I would say it's broadened out.
So I would also Reckon that if you look at our lineup in equities, it's been very strong from a flow perspective. And then anything notable that that's maybe inflected from outflows, inflows over the past year as the overall numbers have improved? I don't have that in front of me. We can look at it. I would probably say We've seen some turnaround like in like some of our more concentrated funds that maybe the Performance wasn't as strong previously that has bounced back, where just based on the lower sales activity, there's always a level of revampions and So you move into a net outflow, but I think some of those have really rectified themselves in some of our fund groups like contrarian and A few of the largest fund areas like that that are seeing some nice performance, our select growth areas, etcetera.
So some of that is more of a, yes, to your point, a little bit more of a turnaround or And picking up our sales and lowering of the redemption. And then just one final one, just a clarification on the
fix annuity block. I think One thing we've heard in the industry is that with rates rising the last quarter over the year, like the bid ask Has widened out a little bit. What are you guys seeing around demand for that block of assets, especially Now with Blackstone getting even bigger among the alternative guys that have already played in the same box there too.
Okay. Walter, do you want to? Yes. It's Walter. We're seeing good demand, as you're indicating.
And certainly, while spreads have widened, Rates have widened. We've seen some narrowing spreads, but we feel very comfortable where the range is that transactions could be executed.
Thanks, Juan. Our next question comes from Kenneth Lee from RBC Capital Markets.
Hi. Thanks for taking my question. Just one on the Advice and Wealth Management business. You've been seeing a nice recovery in margins over the last Just wondering if you
could just give us a
little bit of color about where you think margins could trend over the near term? Thanks.
Yes. So, I think what we would probably say is we see the Trend line continuing. We see our advisor productivity are still quite strong up. I mean, if you So the interest, the advisory productivity was up 8% or more and that's across a very large state. And so that's really positive.
We've seen a pickup as we saw in our flows and teams, Our financial planning, Jeff. So, I would say that we want to continue to see that trend line of the margin continue to accrete. We also think we sort of hit a low point on the interest side of that. And over time, as we deploy a bit more into the bank And get some spread there. That would be helpful as well.
So, I would probably want to see that margin continue to be Targeted to get back into the 20% plus range.
That's very helpful. And just one quick follow-up, just on that fixed annuity reinsurance again. And it sounds like it's Not too much dependent on 10 year yields further rising, but just want to check-in to see whether the outlook for That's how Jackson is headed today on any further increase in the tender yield. Thanks.
Well, I would say we're We're in the range. And certainly, from that standpoint, with the rates where they are and looking at the spreads that transactions can be done. So While it certainly would be beneficial if you get a IR rate coming in, but we are certainly feeling comfortable in this range and We are, as Jim indicated, pursuing.
Right. Very helpful. Thank you.
Our next question comes from Tom Gallagher from Evercore.
Good morning. Just I guess a follow-up on what you're thinking on risk transfer. Is one of the reasons that we haven't heard that you've executed a fixed Moody deal yet because you're considering doing something broader On risk transfer, potentially including long term care or other insurance businesses? Or should we think about those potential For that, it seems done separately.
So, Tom, I would rather say as we look at it, and I'll have Walter Comments. We always evaluate our businesses and look at them both individually and collectively. But there's nothing that ties together us doing a fixed transaction, fixed annuity transaction versus evaluating something in addition to or different than. So, what about
Yes. So let me just
say that from 50 minutes, there's a higher confidence and clearly that from our standpoint, that's what we're focusing on. But As Jim has said, we will entertain and look at that from that standpoint with the quality of our book and the earnings and everything. It certainly Has potential and we will continue to evaluate it. But right now, we're focused on fixed annuities. The other thing I would say, Tom, is at this store, we have shifted our emphasis and also About the new business being put on, but also the current business, derisk a lot in our book, just like we had closed off Our shifting now to structured from guaranteed, our shifting from fixed insurance to Variable, which is a better product both for the client and us in this risk environment.
So we're continuing to change That mix and the shift of that mix, but we will definitely continue to evaluate if there are other books that Could be or should be reinsured or that would make sense for us.
Got you. That's helpful. I guess a question on Advising Wealth. And Jim, I heard your comments about, I guess the confidence in terms of the quality of the flows and Is it fair to say that the move up to almost $8,000,000,000 of RAP flows could be a new level that you might be able to And I guess just relatedly, I just want to make sure there was nothing unusual or unsustainable in this quarter's result like big Ticket new advisors, transferring assets over, do you feel like this could be a new higher level for I would
say, as I mentioned, all of the flow mainly the increase of the total flows, we've had more of an ongoing of Bringing in new advisors and so there is nothing special in the Q4. It was a continuation. I mean, we Continue to bring in a good level of top advisors in the industry with good production. But as you saw, that's been consistent. 3rd We brought in good.
Even the Q2 after the pandemic, that picked up nicely and the Q1 was good. So, no, that continues as an ongoing Trend line in the sport of numbers. But I would say that with more of increased activity from our current Client flows as well as new clients that are current advisors we're bringing into the franchise. Now, Whether that continues at $8,000,000,000 being the base, I can't tell you that, right? I think we all saw A pickup in some level of activity in the Q4 in the industry.
Clients put some more money to work because maybe it's a bit more optimism Of the opening. But I would say underlying it, we feel good about the activity, the level. It wasn't like It went from 2,000,000,000 to 8,000,000,000. It was 6,000,000,000 in the 3rd quarter. So, but Whether it's 8 or 7 or 6, I can't tell you that exactly.
I mean, there's always some level of seasonality, etcetera, as well. I feel good about the underlying and I feel good that there will be a good underlying trend there as we move into this year No, this is an email if there is no major disruption. So that's what I would say.
Okay. Thanks. And then Walter, just one final one. The tax rate moved up a little bit. Can you talk about I was thinking about modeling it over the next year
or 2. Should we see a little bit of an increase because of And next moving to some higher tax businesses now? Yes. So, I think we pretty much hit our August to the year end. And you're correct.
I would say probably a good number if you think about it. It will move up because of the business mix shift. And we're I would say move up maybe 18% would be something like a reasonable number.
18 in 2021 2022, would you think or No, it doesn't just be about more gradual.
2021 Best guess right now and that's without any change in tax laws, obviously. Okay. Thank you. Welcome. Our
next question comes from Samik Kumar from Citi.
Thanks. Good morning. I wanted to go back to the Retail flows, if we could think about it at a high level, it seems like over the past couple of years on a growth basis, The growth inflows have been tracking around $13,000,000,000 a quarter, and now we're at something like $16,000,000,000 for this year For 2020, I guess the question is, how much of this improvement would you say is due to unperformance? And how much of it is due to So, structural changes around distribution platforms and how you've improved your positioning there, if there's any way that you can help us think about that?
I think it's a combination of factors. I think we definitely first of all, we have We had some strong investment performance, but I think it's been very consistent and it's been and now for Some that were underperforming has bounced back nicely as well. So across a larger range, we have very good performance. So I think That performance is part of a given here of what's necessary. I think the team has done a really great job Of broadening the distribution, getting better relationships established more on the various platforms and the due diligence and I think we have a wide range of products that are a wide range that are being considered than in the past As well, and particularly in certain categories that are making sense, like I said, in income categories.
So I think it's a combination of factors that we worked hard at over the last number of years that is starting to show some good results. We've made a lot of investments both in the AWN business to continue to get flows and productivity and the same thing in the asset management business. We continue, we actually completed our whole trading and active use in platform in Columbia Threadneedle. The ability to share Globally has improved the ability to actually get more data and analytics informed to our investment people, our distribution people To improve targeting to understand where there might be some good opportunities. I actually think that Europe showed a nice bounce.
Remember, we had to go through a lot of change there of establishing a whole European lineup of funds with Brexit And it sort of took us out of the market a bit for a while. And now that we've got that lining up established, We saw really strong flows into Europe this last quarter. UK is still a little weak because of the Brexit and the economy being closed, but We've got to see some signs that if that can open with Brexit moving to another completion there that That would also help. So I think it's a combination of factors just as you said. I wouldn't point to 1, But that's what gives us a good feeling as we move forward.
And then I guess moving to A
and WM, if we look The capital that you have in that segment, it's up about $300,000,000 year over year. I'm assuming that's based on the capital you're putting in the bank. So the question is, Yes. How much capital would you be willing to put in the bank to support growth? And how do we think about that So the trade off in terms of capital, specifically for other purposes and then growing the business out?
So I would stop and I'll let Walter complete. I mean, we feel like as we can continue to Derived good margin and good return from the bank activity as a complement to get greater Spread or growth in various loan books there, like our credit assets was growing nicely in the 4th quarter. We took over half of that book back. And the growth is being picked up, which is it will be a good product for us. So, We feel very comfortable continuing to add capital as required there.
As you can see, our overall returns to the Total firm are up in the mid to upper 30s. So it's not as though we have a return issue. And still even with that, our cash flow and what we've generated strong. So it still gives us a good Capital that we could continue to return or look for inorganic acquisitions. So, I don't think that is going to be a pressing issue for us.
But Walter, Do you have something to comment? No. The only thing I'll add to that is that we have in our plan allocated additional capital for the growth that Jim was And feel comfortable. Well, obviously, the return is certainly good when we look at it relative to the off Balance sheet, so we feel comfortable with that and to maintain that risk return equation. So yes, we have allocated more capital to it and we have the capacity to do that.
And now, also seeing, as you can see, whether we evaluate the sale and do a transaction of fixed annuities that will free up capital there or Please enlighten some of the areas of where we have in some of the fixed books. Got it. Okay. Thanks.
Our next question comes from Alex Blostein from Goldman Sachs.
Mode.
A couple of follow ups around the asset management business as well. Could you guys talk a little bit about
The incremental improvement in retail flows that we've seen for several quarters now, and by the way, it feels like that's continued into the New Year, which is great. But that incremental improvement, how much of that is coming from AWM versus 3rd party distribution? I know that's been a Thanks for taking the time to deliver with 3rd party distributors in my remarks. And if that occurs, how sort of does that mix shift, if it's meaningful at all, Sort of impact the profitability for AMP as a whole. So in other words, like if you get much bigger in 3rd party distribution, There's an impact that have been net profitability for firm wide kind of flows that have come through those channels?
So, I'm not sure I understand the second part of the question, but what I would first for the first part I would say, We've seen a nice pickup to the 3rd party channels in complement to Ameriprise. Ameriprise actually picked up a bit, but What I would just say, it is no different than what we're seeing as a pickup across the major distributors that we have. And so both have been positive in that regard because of the combination of the products that we're putting to market and the performance, So with regard to what does that mean, the economics Between the internal sale and the external sale to us is the same. I mean, we pay the same on it. The fees are the same on it, Etcetera.
So, I'm not sure there is a material difference in that way. But overall, as you continue to get Close. I think the return will be good for us.
All right. So there is no material difference and We can still watch that second part. I guess when it comes to M and A, you
gave a little bit you've given a little
bit of color. So it sounds like If you were to do something on the asset management M and A side, you're kind of looking at capabilities over capability type of deals over kind of big For scale purposes alone, so what are the capabilities that you guys still find compelling in particular to kind of better complement the rest
So I would say, Alex, as we look at our business, We have a good lineup. We have scale. We have a global Platform today, it's not as though however, I could say we have Everything we would want in fixed or equities or solutions in all parts of the world. So I think we individually evaluate that from sort of the core of what we do manage today, as well as looking at more of The type of platforms that are necessary. So we're growing a bit more in our solutions business.
We're adding some alternatives, some real estate and things like that over time. So, it's more of, are there Other distribution capabilities and other methods to add to and how we manage Assets for clients, things like that, as well as from a product perspective, we're not against that in scale. Let me be very clear about that. But it would have to be a transaction where it gives us a complement of things rather than we just want to put assets on the platform.
Got it. Sorry. It sounds like you're pretty white listening. Just a quick follow-up for Walter. I think there was an early question on G and A at a firm wide level, not I know people like to ask about AWM.
But if you think about for YG and A about $3,100,000,000 in 2020, it sounds like that could grow a
little bit as Maybe can you
come back and things like that? What is a reasonable growth rate for 2021 off of that $3,100,000,000 number?
Alex, like I said, we're managing expenses well and we're looking at the environment. But I would say that you should look for a couple of basis points. We will evaluate on that couple of cent points on that. That's the range as we look at it. And we're looking to again continue our investment strategy at Same time with our reinsurance program, but that's a reasonable range, couple of percent points.
You're welcome.
Our next question comes from Ryan Krueger from KBW.
Hi, good morning. I just had a quick one. Could you talk a little bit about your Thank you for further growth over the next year and the opportunity to move more street assets there.
Yes. I'll begin and let Walter. So we see an opportunity to continue as we said both for The movement of some of our fleet activities further into the bank, as you saw over the course of last year, we moved the bank up Roughly $4,000,000,000 to $8,000,000,000 So we gradually started to shift more into the bank. We see that continuing in the 2021 here in the New Year. We're also So trying to add more on the product capability, like we picked up the PLEX loan book, we launched the mortgage product.
We'll start to look to add some deposit products, other deposit products for the latter part of the year, maybe into next year. So there are different things like that we're looking at, but we feel the opportunity that will continue to shift a bit more into the bank On a gradual quarterly basis as we move forward. Thank you. Well, do you want to add anything? No, no.
I think to the other part of your question, we certainly have the capacity to follow-up balance sheet We accommodate what Jim just said to and the plans that we filed to grow the bank, so and the capital. So We are certainly positioned to that.
Our last question comes from Eric Bass from Autonomous Research.
Hi. Thank you. Can you help us think about the overall organic growth in the AWM business? We can obviously see the RASP net flows in total client AUM. But are there other metrics you can point Would it help to paint a more holistic view of organic net flows and new client growth and how this compares to some of your peers?
Yes, I mean, I could probably say that organic growth in client acquisition is up Nicely both for the overall client base, but in particular, but also for what we would call the Targeted clients that we want in the 5 to 5 category, that has been nice and strong and picked up nicely as we went through the quarters in the year. The flows from the current climate base continues to be good and actually picked up further In the Q4, as I said to you, the years that we're bringing in and the business and production they're bringing in continues along the line that we spoke to you about, particularly as we continue to move more years into both the employee channel And the independent channel, and that has picked up nicely and Continue to add scale to us. So it's a combination of factors. We continue to get more Based on the technology we deployed that helps advisers concentrate more on their client engagement And can actually focus more on what they can do to deepen. Our advice formula is working really well.
We have more than 50% of the majority of our clients now have goals online that they can track and progress with and see very visibly Of what they're doing and executing their strategies. So all of those things we feel really strengthen the underlying core of the base. And so remember, with the client base we have, with the deepening we have with those Clients with the further engagement around advice and with our advisors now feeling a little more comfortable dealing with the pandemic that they can go out And get more new clients and add clients in this environment or as the environment improves and opens, I think it will be a positive for us. So I can't judge it against anything quickly. I know a number of our competitors If I look at what the warehouses were reported, etcetera, I think we're standing pretty strong against that.
If I look at Competitors that have acquired and have added 2 acquisitions, of course, you're always going to see an increase because of what's Put on from that end on a comparative basis. So, I can't necessarily separate them. But I feel Manically and from a core business, we're doing very well.
Thank you. I appreciate that. And then one question for long term Obviously, good results this quarter. How are you thinking about the potential for IBNR given that people may be eligible to make Claim that haven't because of the pandemic and not wanting to enter a facility or how people come into their homes. And I guess related to that, Kind of the improvement in the book performance over the last year, does that have any potential impact on your ability to execute the reinsurance trends asking for?
Walter, you've been working closely. Okay. So we as you saw this year, we saw improvements both Unfortunately, the termination left people entering into long term care facilities. We have not built in any of that into our unlocking assumptions and we are not again, we're monitoring the situation and We're seeing but with the programs we put in place both on premium increase benefit shifts and things like that and the claims that we're seeing, we feel very good about the book and So risk against the situation.
Got it. Okay. And so no change really in terms of Either appetite for reinsurance or,
capability to acquisition on the interest in it. We feel very good about the position of the risk profile that we see, but certainly we see some interest and we'll just continue to go dilute. I think as we continue to see what is happening both in our book, but also as we evaluate Client behavior or what's happening in that regard, I think if anything, the risk profile continues to look as the more favorable, right? And as people better understand what that is in the marketplace and what they might be interested in, I think it does open up some additional thoughts So, I think we're very open to continue to see how that plays out and maybe that will provide other evaluation and opportunities as we go along.
Got it. Thank you. Appreciate the comments.
We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.